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Agriculture Global News

This year’s extreme drought could mean higher beer prices

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When Spencer Hilton stands in one of the fields on his farm in southern Alberta this time of year, the remains of his harvested barley crop usually reach his knees.

But this summer, the 61-year-old farmer jokes that he could have named each of the plants on his property near Strathmore, Alta., about 55 kilometres east of Calgary, because of the severe drought that scorched most of Canada’s West. And that could be bad news for beer drinkers.

“You can see that the crop is very sparse,” he told Cost of Living senior producer Jennifer Keene. “This is what happens when the crop gets so stressed, as it was during that massive heat dome.”

Like canola, barley is a cool weather crop that benefits from the prairie’s high elevation, with cool evenings and summer temperatures that rarely top 30 C. This summer the area had numerous days hotter than that, and some over 35 C, he said.

That was devastating for Hilton’s barley crop, which he expects to be about a quarter of its normal volume.

“What we’re hearing from the barley organizations and the barley farmers themselves is that this is ultimately going to affect the supply of barley that’s available to maltsters, and as a result, the supply of malt barley that’s available to Canadian brewers,” said Luke Chapman, vice president of federal affairs for Beer Canada, an industry association representing about 55 Canadian brewing companies.

He notes that Statistics Canada recently released crop estimates that show barley production is estimated to be down by about 27 per cent compared to 2020.

“And as we know, when supply gets reduced, the price is likely to go up, which will ultimately likely have an impact on beer prices across Canada over the next year.”

Chapman said the crop failure, coupled with increasing aluminum prices and ever-rising federal beverage taxes, are all pushing up the cost of a can of beer. He notes Beer Canada’s calculations show that already “roughly 50 per cent of the retail price of beer nationally is a form of federal or provincial tax.”

On his Strathmore farm, Hilton can see how the barley shortage will add to these challenges. Normally he sells his barley for about $6 or $7 a bushel — this year the price has risen to $10.

He knows intimately what that means for beer makers. About four years ago, he started up a craft brewery called Origin Malting and Brewing, which uses the barley from his own fields. The slogan for his operation is “We grow beer.”

‘It’s what makes beer beer’

General manager Chris Hooper is the one in charge of brewing at Origin, overseeing production of its pilsners, IPAs — even a passionfruit and blood orange sour.

He said malt barley — which has been immersed in water so it sprouts, allowing the fermentation process to happen — is “fundamental” to what he does. “It’s what makes beer beer.”

Origin’s relationship to the farm means it can have the pick of the small crop, plus it has some malt barley in reserve, said Hooper, so it should remain on track with no effect on the flavour profiles of its beers.

“So if I was another brewery and I was buying … malt out on the open market, you’re probably going to see a significant change in both the amount available and the quality of that product,” he said.

That’s because the extreme drought conditions mean not only that there’s less barley to go around, but less good-quality barley.

“And that means a lot of people are going to have to adjust recipes and kind of change how they’re doing things because you’re not going to getting as much alcohol out of the same pound or kilogram of malt,” said Hooper.

Andrew Bullied, director of brewing operations at Annex Ales Project, a brewery and taproom in Calgary, said he’s never dealt with anything quite like this year’s heat wave and drought.

“This year is the first time that I’ve ever been asked to sign a contract to secure supply for barley. It’s always just been a commodity that’s been there because it’s grown here.”

Indeed that’s normally the case. Canadian beermakers buy roughly 350,000 tonnes of barley from Canadian farmers each year, most of it from Alberta and Saskatchewan, said Chapman. But farms in both provinces were badly affected by the drought.

John Pomeroy, Canada Research Chair in water resources and climate change and professor at the University of Saskatchewan in Regina, told CBC in August the drought could become the worst ever recorded in Canada.

Pandemic fallout

But the shortage of barley isn’t the only thing driving up the cost of making beer.

When bars and restaurants shut down, the beer that would normally be sold in kegs had to be packaged for retail sale instead.

“I think it’s like 25 or 30 per cent of our volume used to go out in kegs, and then when you just lose that overnight, everything that you sell has to go into cans,” he said.

“And if that is true for every single brewery, then yeah, it puts a really big strain on how many cans are produced in the world.”

At Beer Canada, Luke Chapman said the resulting aluminum price increase has collided unfortunately with both the barley shortage and rising federal beverage alcohol taxes, set to increase again April 1, 2022.

“So it seems like there’s a storm kind of brewing here that is ultimately going to have a consequential effect on the prices that Canadians see for beer over the next couple years.”